A three-way agreement between lender, landlord, and tenant that sets what happens to a lease if the lender forecloses. A standard closing requirement on tenanted commercial property.
The longer version
An SNDA is a three-part agreement among a lender, a tenant and the landlord that settles what happens to a lease if the lender forecloses. Each letter is a separate promise, and each one protects a different party.
Subordination puts the tenant's lease behind the lender's mortgage in priority. Without it, a lease signed before the mortgage was recorded could rank ahead of the loan and survive a foreclosure on its own terms, whatever those terms are. Non-disturbance is the lender's promise in return: if the tenant is not in default, the lender or a foreclosure buyer will not terminate the lease. Attornment is the tenant's promise to recognize the lender or buyer as its new landlord.
Both sides want it for different reasons. The lender wants priority and certainty that rent-paying tenants stay. The tenant, especially a large one that has invested in its space, wants assurance that a landlord's default will not cost it the lease.
SNDAs are collected alongside estoppel certificates, usually from major tenants or those above a size threshold set in the loan terms, and the negotiation is in the details: what the lender will not be bound by, such as prepaid rent or offsets against the prior landlord. They are a common reason closings run late, because the tenant has little urgency to sign.
In Prodeal
SNDAs sit on the closing checklist with per-item ownership and due dates, and outside counsel can be given access scoped to exactly the documents they need to review.
Common questions
- What is an SNDA in real estate?
- A subordination, non-disturbance and attornment agreement among a lender, tenant and landlord. The tenant subordinates its lease to the mortgage, the lender agrees not to disturb the tenant if it is not in default, and the tenant agrees to recognize a new owner after foreclosure.
- Why do lenders require SNDAs?
- To make sure the mortgage has priority over leases and that rent-paying tenants stay after a foreclosure. Without subordination, a lease recorded or signed before the mortgage could survive a foreclosure on terms the lender never reviewed.
- What is the difference between an SNDA and an estoppel certificate?
- An SNDA sets future rights between the tenant and the lender. An estoppel certificate confirms current facts about the lease, such as the rent, the term and that no default exists. Lenders usually collect both from major tenants.
- Does a tenant have to sign an SNDA?
- Only if the lease requires it, and many commercial leases do, often conditioned on the lender giving non-disturbance. Tenants negotiate the terms, and getting signatures from tenants with no deadline pressure is a frequent cause of closing delays.